Many Americans are unprepared for cognitive decline.
While many people do not want to think about their mortality, the reality is that all people eventually die.
Despite knowing they will not live forever, many Americans avoid estate planning due to discomfort.
Because many Americans neglect planning for the inevitable, it is unsurprising that they also tend not to prepare for cognitive decline.
According to a Her Money article titled “The Hidden Retirement Risk: What Happens When You Can’t Manage Your Money?,” this can leave seniors in precarious financial situations.
Without proper planning, cognitive decline can place your financial security at risk.
When cognitive decline begins, the first skills lost affect money management.
While Americans are living longer, their financial risk has also increased.
Longer life is not synonymous with health longevity.
Because retirement can now last several decades, seniors who have not prepared for healthcare costs or health crises may find themselves in a challenging situation.
One should begin planning for a possible decline before symptoms have begun.
Why?
Preparing for cognitive decline has various components and phases.
The initial step is to name a trusted contact for financial accounts.
If transactions begin raising concerns with the financial institution, the institution can reach out to the trusted contact.
The next step involves working with an experienced estate planning attorney to create and sign key documents.
What documents are helpful to prepare for cognitive decline?
Durable power of attorney.
If you can no longer manage your finances adequately, the agent designated in your durable power of attorney will be able to do so for you.
It is important to select someone who is both capable and trustworthy, as this individual will manage investment accounts, write checks, and handle your financial matters.
After selecting this individual, acquaint them with your accounts and bills to prepare them for the role.
Health care power of attorney.
A health care power of attorney is used to name someone to make medical decisions for you if you cannot do so yourself.
Although people often choose relatives, the person need not be a family member.
HIPAA Authorization.
Healthcare professionals and insurance companies will often require a HIPAA Authorization to allow explicit permission to speak with the agent designated as your power of attorney or with other loved ones.
Without a HIPAA document, your agent or loved ones may be unable to talk with your insurance company or access your health care information.
Last will and testament.
A last will and testament is a wise investment for anyone.
It is necessary if you have a complex family or have assets and property in more than one state.
In some instances, fully-funded revocable living trusts can be beneficial for their added protections, including probate avoidance.
How can such trusts be helpful in preparing for cognitive decline?
When a revocable living trust is created and funded, assets held in the trust are managed according to its terms and are subject to the trustee's decisions.
A successor trustee can be appointed when the trust is created.
In fact, for senior clients, I recommend adding a trusted adult child as a "current" co-trustee.
In the event of incapacity or cognitive decline, the successor trustee can replace the primary trustee to manage the funds in accordance with the trust terms.
However, when that successor co-trustee is instead added as a current co-trustee, they can monitor trust accounts for indicia of potential fraud and scams before it is too late.
In addition, if the senior parent has a stroke or a more subtle cognitive decline, then that current co-trustee is already in place to seamlessly take care of trust business.
Before early symptoms of cognitive decline appear, compile the contact information for your key advisors and share it with your family.
Initiating introductions so your relatives can begin building relationships with your financial advisor, CPA, or estate planning attorney can make it easier for them to support you.
If you have not yet begun preparations for the stages of life where you may not be able to adequately manage your finances, you should meet with an experienced estate planning attorney to create a plan.
Although you may not experience cognitive decline in your life, you should still be prepared for incapacity and death.
Through estate planning, you can create safeguards and structures to protect your property, yourself, and your loved ones if tragedy were to strike.
Cognitive decline can create significant financial risks.
Creating an estate plan and coordinating it with your financial plan can help to protect your assets and ensure your money is managed effectively when you cannot do so yourself.
Starting early is important so you will not be caught off guard by health crises.
This post is for informational purposes only and does not provide legal advice. You should consult an attorney for advice on any specific issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.
Reference: Her Money (April 15, 2026) “The Hidden Retirement Risk: What Happens When You Can’t Manage Your Money?”
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